It is hard not to feel sorry for Japanese Internet entrepreneur Takafumi Horie. Until just recently he was the darling of the Japanese media, universally known as “Horiemon” – a reference to the cuddly manga character Doraemon. Suddenly though, the 33-year-old CEO of the Internet firm Livedoor, finds himself portrayed as a cartoon villain.

On Jan. 16 Tokyo public prosecutors raided Livedoor’s headquarters in the high-rise Roppongi Hills development. The ensuing blanket media coverage detailed alleged misdeeds, including stock market manipulation and falsifying accounts to conceal losses. The Tokyo bourse reacted quickly; the unexpected raid causing a massive sell-off of Livedoor stock, swamping the exchange’s computer system, and forcing the bourse to close 20 minutes early on Jan. 18. Five days later Horie and three top Livedoor executives were arrested and taken into custody.

Livedoor was founded in 1997 by Tokyo University dropout Horie with start-up capital of just $50,000 (6 million yen). The Yahoo-style portal site grew through a series of takeovers into a group of 44 separate companies and five related companies employing 2,500 people. Horie’s audacious but failed attempts to buy one of Japan’s baseball teams and later to takeover the Fujisankei media conglomerate made him probably Japan’s best known businessman. Horie even stood (unsuccessfully) as an independent candidate in the general election last September.

But while Horie has attracted the admiration of many for his self-confidence and success, he has also attracted the enmity of Japan’s old guard. His detractors accuse him of arrogance and greed. One of Horie’s bestselling business books is titled “Who Earns Wins.” He boasted of his ambition to set up a space tourism business and even hinted that he might one day see himself as prime minister. Horie reportedly chose his 38th floor Roppongi Hills headquarters because it was the only place in Tokyo that he could look down on Tokyo Tower.

Yet, is it too soon to write Horie off? The media seem to presume Horie’s guilt, even before a trial that, judging by other high profile cases in Japan, could well last years. Horie has not yet been officially charged, and much of the coverage has relied on anonymous quotes from the Tokyo prosecutors’ office. The media that once lionized Horie are now dragging him down with equal enthusiasm. Aera magazine devoted 11 pages to the scandal – including an interview with Horie’s father. Another weekly tabloid, Friday magazine, ran the headline: “Tokyo prosecutors’ office reveals: ‘Horie [planned] to evade taxes by going into space.'”

What does the future hold in store for Horie? Some already foretell eventual rehabilitation. “It may be difficult to rebuild Livedoor, but Horie may emerge as a wounded hero,” suggested Nihon Keizai Shimbun columnist Yasuhiro Tase, speaking at the Foreign Correspondents’ Club of Japan last month. After their avid coverage of Horie’s downfall, “the mass media will welcome him back with open arms,” predicted TV Asahi political commentator Soichiro Tahara.

Japan Media Review spoke to Internet entrepreneur and Japan Inc. magazine publisher Terrie Lloyd about Horie’s rise and fall. Both an Australian and New Zealand national, Lloyd arrived in Japan 22 years ago. Like Takafumi Horie, he has been involved with online business since well before the Japanese Internet took off at the end of the 1990s.

This is an edited transcript of interviews conducted by telephone and e-mail.

Japan Media Review: When did you first come across Horie?

Terrie Lloyd: It would have been in the mid-1990s. It was just a little two-bit company and he was kind of a weird guy. [The] Internet was still just getting started back then. It is true that the Internet didn’t really take off in Japan until about 1998 or 1999, and that was because of broadband.

I had just started an Internet business. We were in a similar space. As I recall, he started off by doing server hosting and then very quickly got involved in [mergers and acquisitions] and consulting. His rise to fame has been very recent – in the last three years.

JMR: What was he like back then?

TL: He has always had a disdain for authority. He struck me back then as somebody who was a bit airheaded actually, in other words very ambitious and full of all the things he could do, and unaware of some of the restrictions that were around. Of course, that’s exactly what he turned out to be. He was always very smart though.

JMR: Is it true that he bought Livedoor to get the name?

TL: That’s true. That’s what he said when I interviewed him [for Japan Inc.], that business was losing lots of money. But there was another reason, obviously, and that would be 150,000 freeloading subscribers that he could convert to some of his other services.

JMR: Did you have any inkling he would become so big?

TL: No, it wasn’t obvious at all. Not considering his business model, no core to the business. Fundamentally, the business turned out to be smoke and mirrors.

It was his downfall because when there is no core to your business you are only as good as your last deal in terms of profit flow. So you have to do more and more deals — which means you tend to cut corners. If you cut corners, you break the law.

However, I will say that what he does is not particularly different to what I have seen other people do. I think most successful businessmen in this country have probably cut corners somewhere along the way, and if you look hard enough you will find what it was. The authorities know this, so if someone transgresses too much, well they have always got something to find out and have over you.

JMR: So he cut too many corners?

TL: It was sticking his finger up at people that he should have had a little more respect and time for. It is hard to say who is orchestrating this witch-hunt, but it is a witch-hunt because what he has done is not particularly bad. There has to be some political influence behind it, in my opinion.

JMR: Some people have spoken of a conspiracy?

TL: I don’t know if you can call it a conspiracy. I would say that someone has been doing some dedicated digging at least since the Fuji TV affair to find dirt on Horie, and it was only a matter of time before they found it. It’s pretty obvious because they had to dig all the way back to 2003 to find the ValueClick deal in order to get him arrested.

Once the prosecutor’s department knows there’s a problem, they have to go after the person. But, obviously, someone blew the whistle.

JMR: Do you think he will be convicted?

TL: Personally, I think the charges are really trumped up, like the Yomiuri Shimbun saying he bought the company for more than five times the proper value. There are plenty of instances of companies being bought for more than the book value. That activity in itself is not illegal, unless you knew that you were unofficially pumping up the values.

But you have to wonder where exactly the line can be drawn between gray and illegal, because in this country it is not clear at all.

JMR: Were you surprised at the speed of Horie’s downfall? Is Livedoor really a castle built on the sand as some people are saying?

TL: He hasn’t had his downfall necessarily yet. He’s only under interrogation. So he will get out. I assume he is the major shareholder in his company. If that is the case, he can replace the board and the management at any time.

JMR: Is this the Japanese Enron?

TL: No, it’s not comparable at all. The scope is completely different, we are not talking about anywhere near the same amount of money. And there was never the performance that [Enron CEO Kenneth] Lay and the others allegedly did in the [United] States saying everything was dandy, when in fact it wasn’t. Now, it is true that they say Horie covered up the core company’s losses by transferring profits from other companies, but nevertheless as a group the company was profitable. Although that’s not kosher, it’s not outright lying as we saw at Enron.

JMR: Why do you think the media turned against Horie so abruptly?

TL: That’s just the Japanese media; they are always looking for the next hot story. There are no alliances or allegiances, they couldn’t care less. Some lean left, some lean right, so they tend to protect their own. But Horie was a mean little upstart capitalist; he didn’t really fall into any one media’s bailiwick, so of course none of them are going to protect him.

It’s his own fault, he decided that the way he was going to increase his stock was by [promoting] himself in front of the nation, which, needless to say, gave him a lot of exposure. Now he’s got that same exposure working against him.

JMR: When Horie tried to buy the Fujisankei Group he said that he wanted to bring the Japanese media up to date. Do you think his arrest is going to delay the media’s integration with the Internet?

TL: He changed it to a certain extent. He allowed independent media to be more important. He made a great business out of blogging. Has he changed the conservative incumbent media? No. They are being changed by market forces, not by Horie; the defection to computers; the explosion of 3G cell-phones; the prevalence of free papers. There are many, many different attacks taking place on the traditional media.

JMR: What do you think is going to happen to Horie now?

TL: Two weeks ago, I thought that he would get off the hook. Now I think that he will get hit with some charges, but I don’t think the trial will go as smoothly or as clearly as people expect. I think he will be quite uncooperative. And then, who knows, maybe they will throw the book at him because he was a nasty boy, not because he actually broke any laws.

Or, alternatively, they may back down and give him a suspended sentence – get the trial over quickly so that they don’t have to listen to him rant on day after day. It is hard to say whether he is going to do a Saddam [Hussein], or whether he is just going to go quietly.

JMR: Might the media help rehabilitate Horie one day?

TL: The have vilified him beyond all belief. They did the same thing with Yoshiaki Tsutsumi [ex-chief of the Seibu Railways group] who, in my opinion, did worse things than Horie did – and he got a suspended sentence. He committed fraud by using a holding company to manipulate the shares of Seibu railways.

At least it appears Horie wasn’t knowingly padding his own pocket – he was just building his own company. With Tsutsumi it was sneaky thievery over a long period of time. Mind you, [Tsutsumi] did the right thing; as soon they arrested him he apologized, he said it was all his fault. And the result was that he was chastised and let go.

JMR: If convicted, is there a chance he might come out of prison a quieter, humbler Horie?

TL: If he is smart he will. But you have got to wonder about his personality sometimes.

Dan Gillmor is author of “We the Media: Grassroots Journalism by the People, for the People” and founder of the Center for Citizen Media. He is a well-known and vocal proponent of “citizen journalism” – as he puts it: “the democratization of the tools and the distribution [of journalism] – the idea that anyone can do it.”

Japan has a number of its own citizen journalism projects, notably a “public journalism” site, which is part of Internet entrepreneur Horie Takafumi’s Livedoor News Web site. But despite Horie once vowing to “kill Japanese newspapers and TV,” citizen journalism seems to have barely landed a blow as yet. Site traffic is modest, and professional journalists have seemed critical and wary of the new competition. By way of contrast, in neighboring South Korea, citizen journalism Web site OhmyNews has more than 40,000 citizen and full-time reporters and once logged 25 million page views in a single day.

Japan Media Review spoke to Dan Gillmor about citizen journalism in the United States, South Korea and Japan. As well as considering why citizen journalists have had so little success thus far challenging Japan’s “old” media, Gillmor spoke about how citizen journalism has the potential to change media everywhere.

This is an edited transcript of interviews conducted by telephone and e-mail.

Japan Media Review: You have just set up the Center for Citizen Media. What is the project’s aim and would you describe it as “civic journalism”?

Dan Gillmor: Civic journalism was really about news organizations setting public agendas and being more directly involved with community affairs. The public civic journalism that people talked about was exclusively about big organizations or the local equivalent of mass media doing the agenda setting. The thing that I am focused on is bottom up as opposed to top down. I am involved with the citizen media idea – the democratization of the tools and the distribution – the idea that anyone can do it. I’m very anxious that the existing media organizations participate in this themselves and encourage people in their audiences to participate.

JMR: How does that compare to a project like OhmyNews in South Korea that started off in opposition to the mainstream media?

DG: It was exclusively independent of the main media when they set it up. Their whole goal was to be an alternative, and it was under conditions that are not at all like the conditions in the U.S. You had three newspapers that had a substantial majority among them of all the circulation in Seoul and much of the country. That’s a monolithic media quite unlike anything in the U.S. And those three were very much tied to the power structure in a very fundamental way. While the media in the U.S. tend to be kind of corporate, they are not in general locked into the power structure.

JMR: Do you have any idea why Japan hasn’t come up with any citizen journalism project on the scale of OhmyNews?

DG: I don’t think I am an expert enough on Japan, but Japan has had a very different history with the Internet until the last several years. Internet access was very, very expensive. At the same time the Japanese were one of the two or three world leaders in mobile communications, so a lot of what people have done there that is advanced has been in the mobile area. 2 Channel [a popular Internet discussion board], which is probably the most interesting early experiment, was pretty radical for Japan.

JMR: 2 Channel is hugely popular – reportedly the world’s largest Internet discussion board – but it has been heavily criticized by the Japanese media.

DG: I can understand why. A lot of anonymous chatter is not the same as citizen journalism. At a very basic level, if one doesn’t stand behind one’s own words it is possible that it is journalism, but it is likely that it is not.

JMR: How do you progress from an anonymous and chaotic bulletin board like 2 Channel to a citizen journalism movement?

DG: There is a lot of interesting information on that site and a lot of data, but it is not something I would call journalism. You can learn a lot [on 2 Channel] – from what I understand from people who have told me about it. The problem is that if you are wise you start off with the bias that it is likely to be false, and that maybe there is some truth in there, but who knows? At least that’s my bias when I see anonymous [postings].

JMR: Isn’t that also a problem in citizen journalism?

DG: We are going to have to change what we think of as media literacy, among other things. You have to change attitudes on two sides. One is persuading people who are doing citizen journalism, that if they really want to do journalism that it involves more than just writing down their views. It also means more responsibility on the part of the audience to not assume that everything written is going to be true.

JMR: What are your impressions of the civil journalism movement in Japan?

DG: I would say that there is clearly some interest in this in Japan. They published my book [“We the Media. Grassroots Journalism by the People, for the People”] and to my astonishment put me on the cover of Aera [a Japanese weekly magazine]. [Takafumi] Horie endorsed my book, which was really amazing. He has clearly been pushing the envelope on this.

JMR: There are several citizen journalism projects in Japan, but the media seem to be somewhat standoffish.

DG: Ask them what would happen if they did [support citizen journalism]. Would the [press] club throw them out? In a place where access is so dependent on being a member of this club it is easy to see why major media are taking it slowly.

JMR: Are the Japanese media scared of losing their monopoly?

DG: Well, they are scared of it here too. But the bigger issue in America is not the competition journalistically. I think that’s a side issue. The changes here are coming about almost entirely because the business model is unraveling and everyone is scared. News companies, the bosses, are thinking, ‘Oh my God, we are losing all our advertising,’ and the journalists are starting to realize that their jobs are in real jeopardy. People are experimenting, it’s not like anyone has found an answer.

Classified ads in particular are disappearing onto the Web and newspapers are losing their single most profitable revenue. That’s tending to focus their attention: local newspapers in particular, but [also] advertising in general.

JMR: The Japanese media is much more centralized than the U.S. media with few local newspapers reliant on classified ads. Could that help explain why citizen journalism hasn’t taken off here?

DG: So it will take longer for the business questions to become obvious. They will eventually. It’s a big upheaval.

JMR: Why is the involvement of professional journalists in citizen journalism important?

DG: They need to do more listening and conversing and a little less lecturing. That’s because I think news is fundamentally a conversation and not a lecture; and when journalists realize that they do better journalism.

It would certainly help a lot, give it more obvious legitimacy. The failure to participate won’t stop this, but the participation will certainly accelerate it and maybe will help save the media from otherwise major potential catastrophe.

JMR: And that goes for Japan too?

DG: I assume it’s true [for Japan too]. I am confident that this is true everywhere, that journalists will do better journalism if they think of the process more as a conversation than as a lecture. Period. Having said that, these things will develop in different ways in different places.

JMR: What is the connection between citizen journalism and democracy? How about in a country like Japan where the same party has been in power almost uninterruptedly for over half a century?

DG: I think it’s a fairly simple connection. The more engaged someone becomes with current events, the more likely one is to be a well-informed person. And being well informed is the key to being a good citizen.

JMR: Many people have criticized journalistic standards in citizen journalism. How do you respond to people like [South African academic] Vincent Maher who say that “citizen journalism is dead”?

DG: I thought in the end that he and I agreed on more than we disagreed on. What’s going on now is a snapshot in time and it is going to change. I think that if we can do this right, it is just going to get better. [That’s] in terms of journalism. I don’t have any predictions in terms of the journalism business, that’s a much tougher question.

It’s fair to say that a lot of what people have tried to do has failed, but that doesn’t mean that the idea is a bad one, or that the trend is going to stop. Anything that is radically evolutionary is not going to proceed either on a straight path or on an exponential curve. It’s going to have ups and downs on the way. But I think that the overall trajectory is positive.

JMR: What will be the next step for citizen journalism?

DG: I think the next steps will be more acceptance by the major media, a thousand different experiments, a lot of learning and adaptation. When I said evolutionary I really meant that. It’s a process of many different things being tried, many if not most of them failing, and sticking with the ones that work. The newspaper and the broadcasting media and magazines did not become what they are overnight. It was decades and centuries of refinement and trying different things and staying with what works and discarding what didn’t. It would be silly to attach too much meaning to a snapshot.

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